[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12163-12165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4893]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63975; File No. SR-BX-2011-010]


Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt New Rule 
4763 Regarding Short Sales

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on February 18, 2011, NASDAQ OMX BX LLC (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been substantially prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b4.

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[[Page 12164]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule 
19b-4 \4\ thereunder, proposes to adopt new Rule 4763 as a written 
policy or procedure to implement the amendments to Rules 200(g) and 201 
of Regulation SHO.\5\ BX proposes to implement these changes no later 
than February 28, 2011 to coincide with the compliance date for the 
amendments to Rules 200(g) and 201 of Regulation SHO.
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ 17 CFR 242.200(g); 17 CFR 242.201. See Securities Exchange 
Act Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010) 
(``Adopting Release'') (amending Rules 201 and 200 of Regulation SHO 
to adopt a short sale price test restriction and ``short exempt'' 
marking requirement). See also Securities Exchange Act Release No. 
63247 (Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010) (extending the 
compliance date of the amendments to Rules 201 and 200 of Regulation 
SHO until February 28, 2011).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxbx.cchwallstreet.com/, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On February 26, 2010, the Commission adopted amendments to Rules 
200(g) and 201 of Regulation SHO.\6\ The amendments became effective on 
May 10, 2010, and compliance is required by February 28, 2011.\7\ The 
amendments to Rule 201 of Regulation SHO require trading centers \8\ 
such as BX to establish, maintain, and enforce certain written policies 
and procedures reasonably designed to comply with the rule.\9\ BX is 
proposing to adopt new Rule 4763 as a written policy and procedure to 
implement the amendments to Rules 200(g) and 201 of Regulation SHO.
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    \6\ See supra note 5.
    \7\ Id.
    \8\ Rule 201(a)(9) states the term ``trading center'' will have 
the same meaning as in Rule 600(b)(78). 17 CFR 242.201(a)(9). Rule 
600(b)(78) of Regulation NMS defines a ``trading center'' as ``a 
national securities exchange or national securities association that 
operates an SRO trading facility, an alternative trading system, an 
exchange market maker, an OTC market maker, or any other broker or 
dealer that executes orders internally by trading as principal or 
crossing orders as agent.'' 17 CFR 242.600(b)(78).
    \9\ See 17 CFR 242.201(b). The amendments to Rule 200(g) of 
Regulation SHO provide a ``short exempt'' marking requirement. See 
17 CFR 242.200(g).
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    Proposed Rule 4763(a) defines the terms ``covered security,'' 
``listing market,'' and ``national best bid'' as having the same 
meaning as such terms have in Rule 201 of Regulation SHO.\10\
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    \10\ See Rule 201(a) of Regulation SHO. The System will utilize 
the national best bid from the systems information processor. Rule 
201(a)(1) defines ``covered security'' to mean any ``NMS stock'' as 
defined under Rule 600(b)(47) of Regulation NMS. 17 CFR 
242.201(a)(1). Rule 600(b)(47) of Regulation NMS defines an ``NMS 
stock'' as ``any NMS security other than an option.'' 17 CFR 
242.600(b)(47). Rule 600(b)(46) of Regulation NMS defines an ``NMS 
security'' as ``any security or class of securities for which 
transaction reports are collected, processed, and made available 
pursuant to an effective transaction reporting plan, or an effective 
national market system plan for reporting transactions in listed 
options.'' 17 CFR 242.600(b)(46).
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    Under Proposed Rule 4763(b), entitled ``Short Sale Price Test,'' 
the System \11\ will not execute or display a short sale order with 
respect to a covered security at a price that is less than or equal to 
the current national best bid if the price of that security decreases 
by 10% or more from the security's closing price on the listing market 
as of the end of regular trading hours on the prior day (``Trigger 
Price'').\12\
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    \11\ See BX Rule 4751(a). The term ``System'' shall mean the 
automated system for order execution and trade reporting owned and 
operated by BX.
    \12\ See Rule 201(b)(1)(i) of Regulation SHO. Such execution or 
display needs to be in compliance with applicable rules concerning 
minimum pricing increments. See 17 CFR 242.612.
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    Under Proposed Rule 4763(c), Duration of Short Sale Price Test, 
once triggered by the listing market, the short sale price test 
restriction shall remain in effect until the next trading day when a 
national best bid for the covered security is calculated and 
disseminated on a current and continuing basis by a plan processor 
pursuant to an effective national market system,\13\ as provided for in 
Regulation SHO Rule 201(b)(1)(ii) (the ``Short Sale Period'').
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    \13\ See 17 CFR 242.201(b)(1)(ii). See also Division of Trading 
and Markets: Responses to Frequently Asked Questions Concerning Rule 
201 of Regulation SHO, Q&A No. 2.1.
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    Under Proposed Rule 4763(d), Re-pricing of Orders during Short Sale 
Period, during a Short Sale Period, short sale orders that are limited 
to the current national best bid or lower and short sale market orders 
will be re-priced by the System one minimum allowable price increment 
above the current national best bid (``Permitted Price''). To reflect 
declines in the national best bid, the Exchange will continue to re-
price a short sale order at the lowest Permitted Price down to the 
order's original limit price, or if a market order, until the order is 
filled. Non-displayed orders between the BX bid and offer at the time 
of receipt will also be re-priced upward to a Permitted Price to 
correspond with a rise in the national best bid. During the Short Sale 
Period, immediate or cancel (``IOC'') orders requiring that all or part 
of the order be executed immediately will be executed to the extent 
possible at a Permitted Price and higher and then cancelled, and will 
not be re-priced. Inter-market sweep orders not marked ``short exempt'' 
will be handled in the same manner as IOC orders.
    Pursuant to Proposed Rule 4763(e), Execution of Permissible Orders 
During Short Sale Period, during the Short Sale Period, the System will 
execute and display a short sale order without regard to whether the 
order is at a Permitted Price or higher if, at the time of initial 
display of the short sale order, the order was at a price above the 
then current national best bid. This determination is consistent with 
Rule 201(b)(1)(iii)(A) of Regulation SHO.\14\ Short sale orders that 
are entered into the System prior to the Short Sale Period but that are 
not displayed will be re-priced as described in Proposed Rule 4763(d) 
as set forth above.
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    \14\ See 17 CFR 242.201(b)(1)(iii)(A).
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    Finally, under Proposed Rule 4763(f), Short Exempt Orders, during 
the Short Sale Period, the System will execute and display orders 
marked ``short exempt'' without regard to whether the order is at a 
Permitted Price or higher.\15\ The System will accept orders marked 
``short exempt'' at any time when the System is open for order entry 
regardless of whether the short sale price test has been triggered in 
the covered security. BX member firms marking orders ``short exempt'' 
in reliance on Rule 201(c) or 201(d) are responsible for ensuring that 
any such orders meet the criteria of these provisions and are 
accurately marked as ``short exempt.'' \16\
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    \15\ See 17 CFR 242.201(b)(1)(iii)(B).
    \16\ See Rules 200(g)(2), 201(c) and 201(d) of Regulation SHO. 
See also Division of Trading and Markets: Responses to Frequently 
Asked Questions Concerning Rule 201 of Regulation SHO, Q&A Nos. 5.4 
and 5.5.

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[[Page 12165]]

2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\17\ which requires, among other things, the rules of an 
exchange to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest. The proposed 
rule change also is designed to support the principles of Section 
11A(a)(1) of the Act \18\ in that it seeks to assure fair competition 
among brokers and dealers and among exchange markets. The Exchange 
believes that the proposed rule meets these requirements in that it 
implements rules adopted by the Commission in Regulation SHO under the 
Act.
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    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) 
\20\ thereunder.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally 
may not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \22\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. BX has requested that the Commission 
waive the 30-day operative delay so that it may implement the change no 
later than February 28, 2011 to coincide with the compliance date for 
the amendments to Rules 200(g) and 201 of Regulation SHO. The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest because the 
proposed rule change, among other things, implements the amendments to 
Rules 200(g) and 201 of Regulation SHO which have a February 28, 2011 
compliance date.\23\ For this reason, the Commission designates the 
proposed rule change to be operative upon filing with the 
Commission.\24\
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ Id.
    \23\ See supra note 5.
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-BX-2011-010 on the subject line.

Paper Comment

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BX-2011-010. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street, NE., Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of the filing also will be available for inspection and 
copying at the principal office of the Exchange.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly.
    All submissions should refer to File Number SR-BX-2011-010 and 
should be submitted on or before March 25, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4893 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P